JEPI ETF: Higher Yield Than VYM with Monthly Dividends

The dividend ETF space features two prominent contenders with fundamentally different approaches to income generation. Vanguard’s High Dividend Yield ETF (VYM) tracks the FTSE High Dividend Yield Index, holding approximately 579 large-cap stocks that pay above-average dividends. With $65.9 billion in assets under management and an ultra-low expense ratio of 0.06%, VYM represents the traditional dividend investment approach, focusing heavily on financial and technology sectors while delivering a 2.45% yield through quarterly distributions.

JPMorgan’s Equity Premium Income ETF (JEPI) presents a more sophisticated alternative, managing $41.1 billion in assets while employing a strategy that combines 80% S&P 500 stock exposure with equity-linked notes and written call options. This innovative approach allows JEPI to maintain a substantially higher yield of 7.17% while paying dividends monthly rather than quarterly. The fund’s 12-month rolling dividend yield of 8.13% and cumulative 3-year return of 44.26% demonstrate the effectiveness of its income-generation strategy.

JEPI’s success stems from its dual-pronged approach of investing in high-quality S&P 500 companies while generating additional income through options strategies. The fund maintains a concentrated portfolio of just 124 carefully selected stocks, with top holdings including technology giants Microsoft (MSFT), Nvidia (NVDA), and Meta Platforms (META), alongside reliable dividend payers like Mastercard (MA), Johnson & Johnson (JNJ), and NextEra Energy (NEE). This quality-over-quantity philosophy ensures exposure to market leaders with strong fundamentals.

The fund’s equity-linked notes and written call options on the S&P 500 index provide the engine for its superior yield generation. By selling call options, JEPI collects premium income that boosts its dividend distributions, particularly valuable during periods of market uncertainty when traditional dividend stocks might struggle. This strategy has proven effective in maintaining JEPI’s high yield while providing exposure to quality businesses across sectors, with technology (15.6%), healthcare (12.4%), and financials (12.3%) representing its largest allocations.

Despite its higher expense ratio of 0.35% compared to VYM’s 0.06%, JEPI’s options strategy more than compensates through enhanced income generation. The fund’s top 10 holdings constitute just 16% of the portfolio, providing diversification while maintaining focus on market-leading companies. Additionally, JEPI offers tax advantages since it doesn’t treat dividend payments as distributed capital gains, providing another edge over traditional dividend ETFs.

When evaluating performance, investors must understand the different objectives of these ETFs. JEPI’s net asset value has declined 1.29% year-to-date and 4% over the past year, reflecting its primary focus on income generation rather than capital appreciation. Since inception, however, JEPI has delivered an 80.29% return, demonstrating its long-term value proposition for income-focused investors.

The monthly dividend payment schedule represents a significant advantage for investors relying on consistent cash flow. Unlike VYM’s quarterly distributions, JEPI’s monthly payments provide more frequent income, making it particularly attractive for retirees and those seeking regular passive income. The fund’s 8.13% 12-month rolling dividend yield substantially outperforms VYM’s 2.45%, providing compelling evidence of its income-generation capabilities.

While VYM remains an excellent choice for investors seeking broad diversification across 579 dividend-paying stocks with minimal expenses, JEPI offers a superior solution for those prioritizing consistent income and total return. The concentration in fewer stocks (124 versus 579) means higher exposure to individual companies, but JPMorgan’s focus on quality businesses and the additional income from options strategies creates a compelling package for income-seeking investors in the United States market.